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The national average price of regular unleaded stands at $3.16 per gallon, which is down six cents from a week ago and 35 cents from one year ago. Fuel prices had run up in recent weeks amid the short but intense conflict between Israel and Iran. Now that a cease-fire appears to be holding, concerns about disruptions to crude oil exports from the Middle East have faded, lowering the prices of oil and refined fuels alike. Odds are, gas prices should hold fairly steady at their current levels over the holiday weekend, when millions of Americans will be hitting the road for family barbecues or trips to the beach. Diesel is also down in recent days, with the national average now at $3.69 per gallon.
Oil appears to be back in a trading range of the mid-$60s per barrel for benchmark West Texas Intermediate crude. It spiked to over $70 when Israel began its campaign of airstrikes on Iran and traders worried that Iran could retaliate by closing the Strait of Hormuz to oil tanker traffic. The narrow body of water connects the Persian Gulf to the Indian Ocean and global markets, with 20% of global oil supplies passing through it each day. However, no attacks on shipping occurred, so prices have retreated. We look for WTI to stay in the mid-$60s for now, provided the shaky peace agreement in the Middle East holds and no new geopolitical crises break out elsewhere. That should keep retail gasoline prices fairly steady here in the United States.
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Natural gas prices have also eased, with the benchmark gas futures contract recently trading near $3.50 per million British thermal units. Gas futures had spiked to over $4 recently amid a severe heat wave in the East, which stoked gas demand as power plants worked overtime keeping air conditioners running. Gas is the top fuel for generating power in the United States, so extreme heat tends to buoy gas prices. For now, though, there aren’t any extreme heat waves in the forecast for the most densely populated parts of the country, so gas prices are likely to hover in the mid-$3-per-MMBtu range. The amount of gas held in underground storage is also fairly healthy for this time of year, suggesting that utilities have a supply cushion if the summer does heat up again and boost demand for gas.
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